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Inside the Market’s roundup of some of today’s key analyst actions

Though pandemic-related lockdown restrictions continue to weigh on the performance of its Tim Hortons brand in Canada, equity analysts struck a bullish tone toward Restaurant Brands International Inc. (QSR-N, QSR-T) on Monday following better-than-anticipated first-quarter financial results, propelled by the strength of Burger King south of the border.

On Friday, Restaurant Brands reported earnings before interest, taxes, depreciation and amortization of US$480-million and earnings per share of 55 cents, exceeding the Street’s forecasts of US$456-million and 50 US cents, respectively.

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In a research note titled A Quarter We’ve Been Waiting For, Scotia Capital analyst Patricia Baker hiked her target for Restaurant Brands’ New York-listed shares to US$79 from US$71, keeping a “sector outperform” recommendation. The average target on the Street is US$68.35, according to Refinitiv data.

“The Company returned to positive growth in Q1 with system-wide sales advancing 1.4 per cent (ex-FX), with each brand driving a better than expected performance,” said Ms. Baker. “With 148 net new restaurant openings in the quarter, RBI neared the best ever Q1 trend on restaurant growth. It is clear from the Q1 trends that not only is momentum improving for RBI, but actions taken to drive sales and traffic through the pandemic are taking root. This is particularly evident at Tims, where it appears the decision to move to a Back to Basics strategy is proving out. Overall revenues of $1.26-billion (up 2.9 per cent) were modestly ahead of our $1.25-billion forecast, with all three banners seeing positive year-over-year revenue growth. Net restaurant growth in Q1 was positive at both TH and [Popeyes] but down modestly at BK. Q1 results, broadly speaking, continued to see an impact from the COVID-19 pandemic, primarily reflecting the impact of closures and capacity restrictions; however, the sequential trends are encouraging.”

Others making adjustments include:

* RBC Dominion Securities’ Christopher Carril to US$73 from US$68 with an “outperform” rating.

“As expected, the Tim Hortons Canada business remains impacted by government-mandated restrictions, while BK/PLK U.S. showed stable-to-improving sales trends. Acceleration in net new openings and progress against digital initiatives are positives, in our view,” he said.

* BMO’s Peter Sklar to US$75 from US$71 with an “outperform” rating.

“Restaurant comps for all banners were generally in-line with consensus. Adjusted EPS was a slight beat with lower costs and taxes. Management articulated a number of positive developments on the conference call. In particular, Tim Hortons’ digital sales penetration increased to over 30 per cent, which affirms the brand’s popularity (despite a third-wave) and bodes well for the banner once vaccinations are deployed. We are also optimistic with the recent menu innovations at BK and Popeye’s, which should drive traffic and increase checks as people begin to feel more comfortable dining out,” said Mr. Sklar.

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* CIBC’s Mark Petrie to US$77 from US$68 with an “outperformer” rating

“Q1 results were modestly ahead of expectations and provided solid evidence of the recovery underway at QSR’s banners. Tim’s is a notable laggard owing largely to Canada’s slower exit from pandemic restrictions, but we continue to believe it will post meaningful growth as pressures ease, and this will support a re-rating in QSR shares,” he said.

* Credit Suisse’s Lauren Silberman to US$74 from US$67 with an “outperform” rating.

* Cowen and Co.’s Andrew Charles to US$68 from US$68 with an “outperform” rating

* Stifel’s Christopher O’Cull to US$75 from US$70 with a “buy” rating.

* Deutsche Bank’s Brian Mullan to US$79 from US$77 with a “buy” rating.

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Desjardins Securities analyst Benoit Poirier thinks Transat A.T. Inc.’s (TRZ-T) $700-million in financing from the federal government was “necessary in light of the pandemic” and should enable it to “participate in the industry recovery.”

Accordingly, he raised his rating for its shares to “hold” from “buy.”

“That said, we note that TRZ’s elevated indebtedness will remain a challenge in terms of navigating through the recovery,” said Mr. Poirier. “We believe privatizing the company remains the best option for TRZ in order to successfully execute its turnaround plan.”

He trimmed his target for Transat shares to $4.50 from $6. The current average is $4.04.


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After it reported better-than-expected first-quarter results and expressed optimism about its ability to reach the high end of its 2021 guidance, a group of equity analysts raised their target prices for Capital Power Corp. (CPX-T).

On Friday, benefitting from extreme cold weather in February and general strength in the Alberta market, the Edmonton-based company reported earnings before interest, taxes, depreciation and amortization of $303-million, exceeding the Street’s forecast of $282-million. It also said it was on track to “generate AFFO and adjusted EBITDA that is modestly above the top end of the annual guidance ranges for 2021.”

That release led these analysts to raise their targets:

* iA Capital Markets’ Naji Baydoun to $42 from $40 with a “buy” rating. The average on the Street is $41.54.

“CPX offers investors (1) a mix of contracted (more than 60 per cent) and merchant cash flows,(2) longer-term leverage to the Alberta power market, (3) healthy growth (mid-single-digit FCF/share growth through 2025), (4) an attractive income profile (5.5-per-cent yield, 7 per cent per year dividend growth through 2021, 5 per cent per year thereafter, with a 45-55-per-cent payout),and (5) a discounted relative valuation versus IPP peers,” he said.

* Desjardins Securities’ Bill Cabel to $44 from $42 with a “buy” rating.

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“We continue to believe that CPX is a very compelling investment as it weans itself off coal, develops some of the most efficient thermal assets in North America and more renewables, while big dollars and financial support are thrown at carbon capture, which would be a massive tailwind for CPX,” said Mr. Cabel.

* BMO’s Ben Pham to $41 from $38 with a “market perform” rating.

“We believe the strong pricing environment could persist, providing improved visibility to CPX’s more positive 2021 guidance (modestly above top end of range),” said Mr. Pham.

* Scotia Capital’s Robert Hope $42 from $40 with a “sector perform” rating.

“Capital Power is currently trading at 8.3 times 2023 estimated EV/EBITDA and as such we expect some multiple expansion. However, if the Alberta power market remains strong we see the potential for estimates to be revised higher, which would be a positive for the shares,” Mr. Hope said.

* CIBC’s Mark Jarvi to $41 from $40 with a “neutral” rating.

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* RBC’s Maurice Choy to $41 from $38 with a “sector perform” rating.

* National Bank Financial’s Patrick Kenny to $45 from $44 with an “outperform” rating.

* ATB Capital Markets’ Nate Heywood to $40 from $38 with a “sector perform” rating.


“After all the good stuff,” RBC Dominion Securities analyst Drew McReynolds is expecting a “relatively uneventful” first quarter from Thomson Reuters Corp. (TRI-N, TRI-T) when it reports its results on Tuesday.

“The two positive surprises from Q4/20 results were that management provided a multi-year outlook through 2023 earlier than expected, and that the outlook was well ahead of our forecast on virtually all KPIs (an outlook that is consistent with a blend of our base case and bull case ... With this multi-year outlook and drilldown into key growth drivers at the March 16th investor day,Q1/21 should prove relatively uneventful,” he said.

Mr. McReynolds is projecting consolidated revenues for the quarter of US$1.551-billion, up 2.1 per cent year-over-year and in line with the consensus on the Street of US$1.553-billion. He expects EBITDA to slid 2.6 per cent to US$467-million, narrowly above the US$463-million consensus.

“Issues in focus for the quarter: (i) any change to the demand environment in the U.S. as post-COVID-19 re-opening accelerates; (ii) reiteration that Q1/21 will represent the low point for Legal Professionals organic revenue growth (up 3-4 per cent), and an update on the ongoing migration of Westlaw Edge; (iii) an update on the M&A environment in light of management now setting a “higher bar” for acquisitions given current elevated valuations; and (iv) more granularity on the potential impact of Reuters News instituting new digital paywalls,” he said.

Keeping an “outperform” recommendation for Thomson Reuters shares, Mr. McReynolds bumped up his target to US$100 from US$98. The average on the Street is US$94.56.

“Despite a valuation that better reflects an accelerating growth trajectory through 2023, we continue to view Thomson Reuters as a low-risk double-digit total return compounder and thus still view the stock as an attractive core holding in our coverage,” he said.

“While valuation at 18.7 times FTM [forward 12-month] EV/EBITDA is at the high-end of the post-F&R historical range of 12.5 times-18.7 times, we believe recent multiple expansion can be sustained given accelerating organic revenue growth to 5-6 per cent by 2023 alongside: (i)significant margin expansion with EBITDA margins approaching 40 per cent; and (ii) rising EBITDA-to-FCF conversion given easing capex intensity. As such, we expect investors to benefit from 9-per-cent annual NAV growth and high-single digit/low-double digit annual dividend growth making Thomson Reuters a low-risk, double-digit total return compounder with further upside potential in our view should anticipated tuck-in acquisitions and/or divestitures prove accretive.”


Energy Infrastructure equity analyst Elias Foscolos of iA Capital Markets made a pair of rating changes on Monday with first-quarter earnings season accelerated.

Citing “strong” movement in its share price, he lowered Keyera Corp. (KEY-T) to “hold” from “buy” with a $29 target, exceeding the average target on the Street by 19 cents.

Conversely, seeing weakness in its stock, Mr. Foscolos raised Emera Inc. (EMA-T) to “buy” from “hold” with a target price of $60. The average is $58.93.


Emphasizing “favourable” industry fundamentals and expecting a “solid” backlog and the integration of its recent acquisition of Stuart Olson Inc. to “support sustainable growth,” iA Capital Markets analyst Naji Baydoun initiated coverage of Bird Construction Inc. (BDT-T) with a “buy” recommendation on Monday.

“Overall, we view the current macro-economic environment as being supportive of further infrastructure investments in Canada, driven by (1) strong economic growth in 2021-22, supported by public fiscal stimulus measures for infrastructure, (2) low/stable interest rates, which should support investments in large-scale, capital-intensive infrastructure projects (via availability of low-cost financing), and (3) a significant infrastructure investment gap that should support long-term investments in the sector,” he said.

Mr. Baydoun called the acquisition of Calgary-based infrastructure & construction services company Stuart Olson, which closed in the third quarter of 2020, “transformational” and noted: “Overall, the SOX acquisition (1) diversifies BDT’s backlog/portfolio across geographies and end-markets (which should translate into a lower risk profile), (2) strategically expands the Company’s footprint and service offerings (which could translate into future revenue synergies), and (3) is expected to be immediately accretive to per share financial metrics (including $25-million of identified run-rate cost synergies). From a longer-term perspective, we expect BDT’s expanded suite of service offerings to support more sustainable top-line growth and further margin improvements over time.”

The analyst sees a “solid” mid-to-high single-digit growth profile for Bird, pointing to its current $2.7-billion backlog and pending $1.6-billion backlog providing ”good” visibility on both its near-term revenues and potential growth.

“BDT’s current low leverage profile (less than 1.0 times net debt/Adj. EBITDA) and sustainable dividend (39 cents per share annualized, within an 20-30-per-cent FCF payout through 2025, by our calculations) provide the Company with significant financial flexibility to pursue additional accretive M&A opportunities, which would provide further support to the overall outlook (excluded from estimates/valuation).”

Seeing a discounted valuation, he set a target of $11.50 per share. The average on the Street is $10.94.

“Overall, we see significant upside potential to the current share price from (1) continued execution on the current backlog, (2) the ongoing integration of SOX, (3) additional contract awards, and (4) further margin improvements. As the Company continues to execute on its growth strategy, we see the potential for the shares to experience a positive valuation re-rating over time” Mr. Baydoun said.


Choice Properties REIT’s (CHP.UN-T) “solid” in-line first-quarter results demonstrates the “resilience” of its portfolio, said BMO Nesbitt Burns analyst Jenny Ma.

“The steady results vs. the year-ago pre-pandemic period and expectations is a convincing reflection of the stability of Choice’s essential retail anchored portfolio,” she said.

Ms. Ma raised her target by $1 to $14.50 with a “market perform” rating. The current average is $14.54.

Others raising their targets included:

* Canaccord Genuity’s Mark Rothschild to $15.50 from $14.50 with a “buy” rating.

“Looking forward, we expect modest same-property NOI [net operating income] growth from the REIT’s portfolio over the next few quarters, largely driven by contractual rent escalations and leasing spreads, with additional contributions from completing developments,” he said.

* RBC Dominion Securities’ Pammi Bir to $14.50 from $13.50 with a “sector perform” rating.

* CIBC’s Summayya Syed to $14.25 from $14 with a “neutral” rating.

* Scotia Capital’s Himanshu Gupta to $14.50 from $14 with a “sector perform” rating.

* TD Securities’ Sam Damiani to $15 from $14 with a “hold” rating.

* Desjardins Securities’ Michael Markidis to $14.50 from $14 with a “hold” rating.


Dealers of Caterpillar products are “positioned to pounce” on a cyclical recovery in demand, according to Canaccord Genuity analyst Yuri Lynk.

Ahead of the release of their quarter results, he raised his targets for shares of both Finning International Inc. (FTT-T) and Toromont Industries Ltd. (TIH-T) with that view.

“In our view, we are in the early innings of cyclical recovery in demand for Caterpillar equipment, parts, and service,” said Mr. Lynk. “North American machine utilization, as measured by Komatsu’s Komtrax remote monitoring system for construction equipment, did have a slow start to 2021 but registered an impressive 10.9-per-cent year-over-year increase in March. Higher machine utilization is a precursor to increased product support revenue.

“We are also seeing encouraging signs for mining equipment demand. Parker Bay’s Mining Equipment Index shows global surface mining machine deliveries increased 35 per cent year-over-year in Q4/2020, the first quarterly increase in two years. The index now sits at 63.7, still well below the 92.7 peak of the last cycle in Q4/2018.”

For Finning, his target jumped to $37 from $33 with a “buy” rating. The average on the Street is $36.17.

“We see upside to our revenue and margin estimates. Finning entered the quarter with 12 per cent more backlog than at the same point last year due to strong order intake in the UK & Ireland (reflecting initial orders on HS2) and South America (on higher mining equipment order intake),” said Mr. Lynk. “Meanwhile, product support should continue to recover toward pre-pandemic levels as oil sands mining proves resilient and base metal activity responds to higher prices. Seven years of restructuring has Finning well positioned to upside surprise in the first quarter, and we see tremendous upside to mid-cycle EPS, which we peg at $2.20.”

His target for Toromont rose to $107 from $99 with a “buy” recommendation, exceeding the average of $103.22.

“We’re a little more cautious on the quarter than others because of the COVID-19 lockdowns in Ontario and Quebec. Apart from that, Toromont should benefit from recovering equipment, parts, and service demand, especially from its mining clients, 50 per cent of which are precious metal producers,” he said.


In other analyst actions:

* CIBC World Markets analyst Stephanie Price upgraded Information Services Corp. (ISV-T) to “outperformer” from “neutral” and her target to $32.50 from $25. The average on the Street is $27.65.

“ISV has a stable core business and we see upside from a recovery in the Saskatchewan housing market and from other land registry opportunities,” she said. “With the stock trading at 9.3 times EV/22 EBITDA versus registry/information services peers at 14.5 times, ISV is attractively valued and we see potential for the company to become an acquisition target.”

* Ms. Price initiated coverage of Dye & Durham Ltd. (DND-T) with a “neutral” rating and $47 target. The average is currently $58.75.

“We hold a positive long-term view on Dye & Durham’s (D&D) strategy of rolling up the critical back-office software used by legal and business professionals to create a comprehensive platform,” she said. “D&D has a sticky customer base, with 2-per-cent customer churn and an average customer tenure base of 17 years.”

“We are initiating coverage on Dye & Durham with a Neutral rating and $47 price target as we watch the integration of over $800 million in acquisitions since the company’s IPO in the summer of 2020. We expect these integration activities to continue to impact adjusted EBITDA and free cash flow conversion. The wildcards are future M&A and land registry opportunities, both of which we view as upside to our estimates.”

* RBC Dominion Securities analyst Mark Dwelle hiked his target for Fairfax Financial Holdings Ltd. (FFH.U-T, FFH-T) to US$550 from US$500 with an “outperform” recommendation.

“The P&C units are increasingly the stars of the show as pricing driven growth works into margins and growth accelerates,” he said. “Capital return increased and the company has plans to reduce debt ratios with transactions slated to close in 2Q. While non-insurance units remain a drag on earnings, their fair value continues to rebound. We continue to find shares attractive and see Fairfax as one of the most overlooked properties in the P&C space,” said Mr. Dwelle.

* JP Morgan analyst Phil Gresh increased his Imperial Oil Ltd. (IMO-T) target to $42 from $39 with a “neutral” rating. Other moves include: ATB Capital Markets’ William Lacey to $40 from $38 with a “sector perform” recommendation; Scotia Capital’s Jason Bouvier moved his to $39 from $35 with a “sector perform” rating and BMO’s Randy Ollenberger to $40 from $37 with a “market perform” rating. The average is $33.61.

“Imperial Oil delivered better-than-expected results from all of its operating segments. The company also announced it will be increasing its dividend by 23 per cent and buying back 4 per cent of its shares by the end of June. Imperial’s stock has outperformed peers over the last 16 months and maintained its premium valuation on the back of strong operating performance. While we like the investment attributes, we believe some of their peers are more attractively valued,” said Mr. Ollenberger.

* Ahead of the May 10 release of its first-quarter results, Desjardins Securities’ David Newman raised his target for Chemtrade Logistics Income Fund (CHE.UN-T) to $12 from $9 with a “buy” rating, exceeding the $8.56 average, while Raymond James analyst Steve Hansen raised his target to $12 from $9 with an “outperform” recommendation.

“While the impact should be felt on a lagged basis (eg caustic soda is priced based on the Northeast Asia index for the last month of the previous quarter), a recovery in chemicals demand and prices should translate into an acceleration in earnings toward 2H21 and 2022,” Mr. Newman said.

* RBC’s Paul Quinn raised his Canfor Corp. (CFP-T) target to $45 from $40, reiterating an “outperform” recommendation, while BMO Nesbitt Burns’ Mark Wilde increased his target to $36 from $31 with an “outperform” rating. The average is $41.50.

* CIBC’s Bryce Adams raised his Teck Resources Ltd. (TECK.B-T) target by $1 to $33, exceeding the $31.10 average, with a “neutral” rating.

* Mr. Adams also increased his Lundin Mining Corp. (LUN-T) target to $16 from $15 with a “neutral” recommendation, First Quantum Minerals Ltd. (FM-T) target to $36.50 from $35 with an “outperformer” rating and Copper Mountain Mining Corp. (CMMC-T) to $5.50 from $4 with an “outperformer” rating. The averages are $15.97, $32.44 and $4.78, respectively.

* Mr. Adams hiked his Capstone Mining Corp. (CS-T) target to $7 from $4.80 with an “outperformer” recommendation, while RBC’s Sam Crittenden moved his target to $6.50 from $5.50 with an “outperform” rating. The current average is $6.18.

* CIBC’s Scott Fromson increased his Allied Properties REIT (AP.UN-T) target to $47 from $44 with an “outperformer” rating. The average on the Street are $46.7

“We like Allied’s intensification strategy and differentiated asset portfolio in Canadian urbancore markets, which we believe will prove to be highly durable,” he said. “Our thesis can be summarized as follows: 1) the return-to-office movement is strengthening and people can’t wait to return downtown from their basements (and get vaccinated); 2) Allied will benefit from the ongoing shift to workplaces that are flexible, well-located, energy efficient, and thoughtfully designed; 3) Allied will capitalize on ample value-creation opportunities, building on its proven, prudent intensification track record; and 4) Allied’s valuation will increase, to approach pre-pandemic levels and thus reflect its stronger growth profile and increasingly advantageous positioning in a hybrid work world.”

* CIBC’s Hamir Patel assumed coverage of CCL Industries Inc. (CCL.B-T) target to $81 from $75 also with an “outperformer” recommendation. The average is $76.67.

“We believe CCL’s diversified platform and end-market exposure support steady revenues over the cycle, with potential for greater organic growth as the global economy recovers and significant flexibility to consider M&A opportunities. While organic growth declined 3.9 per cent in 2020, we are forecasting organic revenue growth of 6.5 per cent in 2021 and a further 3.5-per-cent growth in 2022. CCL’s FCF yield of 5.1 per cent in 2021 and 5.4 per cent in 2022 compare favorably to its U.S. peer group,” he said.

* Mr. Patel also assumed coverage of Intertape Polymer Group Inc. (ITP-T) with a target of $37, up from $35.50 and topping the $35.56 average on the Street. He kept the firm’s “outperformer” rating.

“Our 2021 EBITDA forecast ($240-million) is at the high end of management’s guidance range as we believe demand trends in e-commerce have proved more resilient than most forecasters originally anticipated at the start of the year. We also believe strong market conditions will allow ITP to pass on near-term escalation in input costs. ITP’s FCF yield of 6.9 per cent in 2022 compares favorably to the 5.0-per-cent average yield of its two Canadian plastic packaging peers,” said Mr. Patel.

* CIBC’s Mark Petrie increased his target for Aritzia Inc. (ATZ-T) to $39 from $31 with an “outperformer” recommendation. The average is $34.19.

“We remain bullish on Aritzia’s growth opportunities, including new products, building U.S. brand awareness and increasing e-commerce penetration, all set in a favourable recovery backdrop. We update our estimates for Q4/F21 and Q1/F22 to reflect government-mandated store closures and web traffic trends, and introduce F23 estimates,” said Mr. Petrie.

* JP Morgan’s Tyler Langton increased his Agnico Eagle Mines Ltd. (AEM-T) target to $86 from $84 with a “neutral” recommendation. The current average is US$86.63.

* TD Securities analyst Graham Ryding raised his TMX Group Ltd. (X-T) target to $155 from $145, keeping a “buy” rating. The average is $149.

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